Amylin's future hazy in wake of FDA rejection

Like most drug developers, Amylin spends far more money on research work and overhead expenses than it brings in through existing drug sales and payments from its pharmaceutical company partners, such as Eli Lilly.

The company had to borrow heavily in recent years while building up a cash reserve large enough to continue research and operations while moving Bydureon forward.

About $94 million in loans have come due this year. An additional $200 million is due in 2011, and $575 million must be paid by 2014.

Amylin had a cash stockpile of $574.2 million as of June 30, and executives have said the company should end the year with more than $500 million in the bank.

Amylin should have no trouble servicing its debt over the next two years, Bradbury said. If the company runs short of cash, it can tap a $165 million line of credit from Lilly, he said.

With Amylin’s stock now trading 38 percent below its levels before the FDA rejection of Bydureon, at least one analyst has said the company might become an acquisition target of Lilly.

It could easily integrate the San Diego company’s diabetes portfolio into its own operation. And the Indianapolis drugmaker is under increasing pressure to bulk up its product line as patents expire in 2011 for several important medicines, including its most profitable drug Zyprexa.

Such speculation isn’t new.

Many analysts and investors have long presumed that Amylin eventually would be bought out by a larger drugmaker, but the big question is when that might happen.

It’s not uncommon for a company with solid fundamental underpinnings to become an acquisition target when disappointing short-term circumstances pull down the value of its stock.

What's next

Thursday: Amylin will report third-quarter results.

November: Executives will meet with Food and Drug Administration officials to discuss the design of a new clinical study examining Bydureon’s effect on heart muscle.

Late 2011: The company hopes to complete the new study and resubmit Bydureon to the FDA for reconsideration.

However, other dynamics can come into play in the biotechnology world, said Mark Schoenebaum, a biotech stock analyst with ISI Group in New York.

Potential buyers probably won’t bite on a drug developer until there are indications that the target’s experimental drug will make it onto the U.S. market, he said.

“The question (with Amylin) is, will Bydureon be a big drug or not,” Schoenebaum said. “I imagine a buyer would want to know the results of the (new heart effect study). I’m not a big believer that Amylin gets bought before that data.”

At its core Bydureon is the same as Byetta, a synthetic version of a hormone found in the saliva of the Gila monster that improves blood sugar control in humans. For the weekly version, the active ingredient — a molecule called exenatide — is encased in a polymer ball that slowly dissolves in the body to release the drug. The polymer is the same one used to make dissolvable stitches.

As amounts of Bydureon build up in a patient’s system, appropriate doses of the drug are released, Bradbury said.

“It’s processed in the same way (as Byetta), but it’s designed so that the drug is there all the time,” he said.

Amylin officials said they believe Bydureon will pass the new test required by the FDA because a long-term study of Byetta turned up no signs of heart problems. Those results were reported earlier this year.